ETF 8 year deemed disposal strategy

Degiro is not a product provider - the product is provided by the investment company that sets it up - Vanguard, Amundi, etc

The product providers have no interest in providing tax accounting for the millions of customers in hundreds of tax regimes - it is unmanageable for them

The products are sold on stock exchanges so the brokers could be asked to do this but again hundreds of thousands of customers across tens, if not hundreds of tax regimes - that is impossible

Ireland is the only country in Europe that has exit tax on ETF products - everyone else treats them like shares which is what they are in reality

The life assurance companies in Ireland are delighted with the system as it keeps their customers using their high priced products
 
It's pretty impressive that the life assurance companies created the exit tax regime and got Government to apply a version of it to ETFs, insisting on a Government Levy on their offering as well and managing the taxation in its entirety for those who choose to buy what they have.
 
jpd said:
everyone else treats them like shares which is what they are in reality
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Is this the reality? When you buy an ETF you don't own a share of each company. You own a share of a fund that itself is buying shares of the companies.

In reality it is a fund, that trades on a stock exchange like shares do.
 
In the case of managed funds, does the underlying fund manager manage the exit tax at 8 years?

I don't think so.

Or does the life assurer? It looks to me that it is the life assurer that does it

Of course, the life assurer gets paid to manage the exit tax, as the AMC they charge is much more than the underlying fund charge




Okay, could that regime be applied to ETFs sold and held by stockbrokers?

Would DeGiro be willing to manage exit tax, in return for charging a fee on top of the underlying AMC of the EFT?

I don''t think so.
 
The thing about deemed disposal is that customers want it to be better/easier. I presume the vendors would liked it to be better too, but it would be interesting to see how many of the vendors of EFTs made submissions on the funds review. My guess would be very few.

The issue appears to be that sellers and buyers want someone else to pay for making it better.

The tax has to come from somewhere.

Government aren't going to compel the sellers of EFTs to create systems and manage all aspects of the taxation for customers but it would be definitely interesting to see how much they would charge for that service, that's automatic with Life Assurance Exit Tax. Government could probably afford to reduce the tax rate if there was 100% compliance. You wouldn't think that looking at the rate of LAET but, the more I think about that one, the more I'm convinced it's a tax on the industry as some 'payback' for tax relief on pensions. Again, someone has to pay.

A small reduction in the rate and flying the kite of a potential gross roll up (limited) savings scheme might be the best that customers can hope for.
 
The Irish government has no say in how foreign bodies handle Irish tax regulations whether it's Exit Tax, DIRT, CGT or CAT- it's up to the Irish taxpayer to file and pay the taxes in a timely fashion
 
MelF said:
I bought some Vanguard via eToro and am assuming they handle the deemed disposal side when time arrrives. Or that Revenue automatically applies it - is that not the case or is it only done inside life co wrappers as you say above?
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No, they do nothing. You need to handle your tax affairs yourself for anything outside a life assurance tax wrapper.
 
Do contributors think that there are many people holding ETFs in the like of DeGiro, and not declaring the gains at 8 years or at disposal?
 
Protocol said:
Do contributors think that there are many people holding ETFs in the like of DeGiro, and not declaring the gains at 8 years or at disposal?
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How could anybody know that other than, at best, anecdotally? Do some people evade tax? Yes. Do some people do it accidentally/through ignorance of the rules? Most likely. Do some people do it strategically/deliberately? No doubt. How many? Who knows.
 
Protocol said:
Do contributors think that there are many people holding ETFs in the like of DeGiro, and not declaring the gains at 8 years or at disposal?
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That just shows the stupidity of the whole deemed disposal regime for etfs, its too hard to comply with it, almost impossible to enforce and nobody else except ireland does it. Its raising very little taxation anyway in the overall scheme of things. Its also a bit hypocritical given that irish government has gone out to deliberately entice these very etfs to domicile in this country 1 trillion in etf capitalisation now domiciled in Dublin, every other European citizen is investing in them except irish people
 
Thanks for all the input. It sounds like the first 8 year DD is relatively easy to deal with so I will probably hold on to my ETFs for now.
 
Don't forget to report any dividend payments- they too are subject to the 41% Exit Tax
 
Let's say from Jan 2020 onwards I buy 500 euro every month of the same diversified ETF on a stockbroker platform like DeGiro.

12 purchases per year * 500 euro each time. I do this for eight years, 96 months. I have spent 48,000.

Let's assume the fund is worth 60k at the end of eight years.

In theory, what should happen?

DeGiro don't report anything, or apply any tax, so I declare a 12k gain to the Revenue, and prepare to be asked for 41% exit tax on the 12k gain.

Is that correct?



I read somewhere else that exit tax should be applied to the gain from each of the 96 puchases. That means 96 calculations. Is that correct?
 
Protocol said:
Say a UK resident buys ETFs on DeGiro.

How is the return taxed?
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It's self-assessed. In principle the gains are subject to CGT at 20% and the dividends, whether paid out or reinvested, are subject to income tax at up to 39.35%.

Gross roll-up of accumulating funds is not allowed.
 
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Protocol said:
Let's say from Jan 2020 onwards I buy 500 euro every month of the same diversified ETF on a stockbroker platform like DeGiro.

12 purchases per year * 500 euro each time. I do this for eight years, 96 months. I have spent 48,000.

Let's assume the fund is worth 60k at the end of eight years.

In theory, what should happen?

DeGiro don't report anything, or apply any tax, so I declare a 12k gain to the Revenue, and prepare to be asked for 41% exit tax on the 12k gain.

Is that correct?



I read somewhere else that exit tax should be applied to the gain from each of the 96 puchases. That means 96 calculations. Is that correct?
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You haven't made a 12k gain at Year 8. You have made a gain on the first tranche of 12 x 500 investments, which cost 6k. Let's say they are worth 7.5k. So you declare a gain of 1.5k on that tranche and pay 41% in tax.

Repeat the process for the next tranche each year. It's an annual calculation, not every month.
 
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